Outlook for Pound to Rand Exchange Rate Today: GBP ZAR/Falls as Silver Price Hit Eight Year Best

February 1, 2021 - Written by John Cameron

STORY LINK Outlook for Pound to Rand Exchange Rate Today: GBP ZAR/Falls as Silver Price Hit Eight Year Best

GBP/ZAR Exchange Rate Sinks as Risk-On Markets Boost Appetite for South African Rand

The Pound to South African Rand exchange rate fell by -0.5% today, with the pairing currently fluctuating around R20.61.

The South African Rand benefited from risk-on market mood today after silver prices hit an eight-year high.

Analysts at Bloomberg explain:

‘Retail sites for silver have been overwhelmed with demand for bars and coins, suggesting the frenzy that roiled commodities markets last week is spilling over into physical assets.’

In South African economic news, today saw the nation’s manufacturing activity expand in January, with the seasonally-adjusted Absa Purchasing Managers’ Index inching up to 50.9.

Analysts at Reuters were more pessimistic about the outlook for South Africa’s economy, however, saying:

‘The figure was above the 50-point mark that separates expansion from contraction but well short of the average in the final quarter of 2020, suggesting a slow economic rebound.

‘There was a fourth consecutive decline in the business activity sub-index, although there were gains in the sub-indices tracking new sales orders and expected business conditions in six months’ time.’

However, with risk-on market mood buoying appetite for the risk-sensitive South African Rand, economic data has had little effect on the ZAR/GBP exchange rate today.

Investors are confident that Europe’s Covid-19 vaccination programme, China’s economic recovery – and a substantial US stimulus package – will help stabilise the global economy in the months ahead.

Pound (GBP) Sinks as UK Economic Outlook Falters as UK Manufacturing Comes Close to ‘Stalling’

The Pound struggled against the South African Rand today despite an uptick in the UK’s Manufacturing PMI data for January, which beat forecasts and rose to 54.1.

Rob Dobson, director at IHS Markit, was concerned about the UK’s manufacturing sector, however, commenting:

‘Whereas many countries are seeing manufacturers provide a much-needed support to economic growth as the service sector is hit by COVID-19, the UK’s manufacturing sector has come close to stalling.’

Meanwhile, Chris Barlow, the head of manufacturing at MHA, said:

‘UK manufacturing was artificially boosted in December 2020 because companies took measures to avoid the anticipated Brexit chaos at UK ports. Now Brexit trade friction is starting to bite.’

As a result, UK markets are remaining cautious, with the outlook for the manufacturing and services sector still largely uncertain despite the British Government’s Covid-19 vaccine rollout.

Could Risk-On Market Mood Boost the South African Rand (ZAR)?

The South African Rand could head higher this week if risk sentiment continues to improve.

If the EU announces further goals in its Covid-19 vaccination programme, we could see global market mood improve, boosting the ZAR/GBP exchange rate.

However, if global coronavirus cases continue to rise, then we could see risk-off mood re-emerge and drag down the risk sensitive South African Rand.

The Pound could head higher, however, if the UK’s Covid-19 vaccination programme continues to rapidly unfold.

Any further signs that the programme could on target for mid-February, then the GBP/ZAR exchange rate would claw back some of its losses.

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TAGS: Pound Rand Forecasts South African Rand Forecasts